UK Oil and Gas Industry

Stephen Flynn Excerpts

Tuesday 25th February 2020 Westminster Hall

[Stephen Flynn (Aberdeen South) (SNP)]

Thank you very much for the opportunity to speak, Mr Robertson. I thank the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) for bringing this important debate. Like me, he represents a fantastic part of the country. I have a lot more of the city than he does—in fact, very much more—but the issues that impact our constituents, certainly in terms of the oil and gas industry, are incredibly similar.

That trend exists right across the north-east of Scotland: quite frankly, there is not a family or individual who does not know someone directly linked to the oil and gas sector or indirectly linked through the enormous supply chain that we heard about. The effect and influence of the North sea oil and gas sector in the north-east of Scotland is something to behold, and we rightly debate it today. The industry impacts not only the north-east of Scotland and Aberdeen, but the entirety of Scotland and, indeed, this United Kingdom, through the skills and expertise that it puts forward and the economic benefit that it brings to these islands. That is an incredibly important topic that I will come to.

As we heard from the hon. Gentleman, as the Government move towards the Budget, we need stability—everyone in the oil and gas sector at this moment in time craves continued stability. As we heard, the crash had a devastating impact on the lives of so many people. Frankly, the city is still recovering; house prices and the like are still significantly below where they were prior to the crash. That, obviously, had an impact on so many individuals, so we need stability within the tax regime. I certainly hope the Minister will be able to provide clarity about that.

However, this discussion should not only be about stability and the here and now; it also has to be about what the future entails for the oil and gas sector. As we heard—and rightly so—we want a net zero future for Scotland and the United Kingdom, and it is vital for all our future prosperity that we get to that point sooner rather than later. Perhaps the best way in which that could be achieved, certainly from my perspective, is through harnessing some of the economic gain from the oil and gas sector.

The Office for Budget Responsibility estimates that roughly £8.5 billion of revenue from the sector will be incoming in the years up to 2022. We should take some of that money—roughly 12%; £1 billion—and reinvest it into cities such as Aberdeen, to protect the workforce going forward as we make that transition. It should be a sustainable transition that reflects the fact that the industry has an incredibly important role to play in all our collective futures. Simply turning off the tap will not work, but we can ring-fence that money to protect cities such as Aberdeen, where energy is the key industry and where jobs are on the line. I sincerely hope that the Minister will be forthcoming in agreeing to such remarks.

Obviously, we have heard a lot about an oil and gas sector deal. I have heard questions in the Chamber about it and we saw it in the Conservative manifesto; in fact, we have heard it talked about for a number of years now, although I have yet to see any substantive detail. The Minister has the opportunity today to clarify the detail, including what will be in an oil and gas sector deal and whether it will include actions, rather than just a few words in a manifesto.

Hopefully, within the sector deal the Minister will take forward the proposal that I just suggested. It was overwhelmingly supported by the people of Scotland in the general election in December, as a key tenet of the Scottish National party manifesto. It will not have missed the gaze of Government Members that the SNP did extremely well in that election, based on that manifesto commitment. Indeed, there were changes in some seats, including that of my hon. Friend the Member for Gordon (Richard Thomson).

I will labour the point: we have an opportunity to ring-fence some of the income. We have, of course, heard words from the UK Government over many decades about how they will seek to protect the oil and gas industry, yet when we look across the North sea at Norway—enviously—we see a nation with a trillion-dollar oil and gas fund while we have nothing. It is perhaps too late to introduce an oil and gas fund, but it is not too late to ring-fence some of the income that will be generated, to protect the future prosperity of cities such as Aberdeen and, indeed, other energy hotspots throughout Scotland and the United Kingdom.

The issue is important because, as I have said, we need to make an energy transition. We heard earlier about BP wanting to make a rapid transition. I have had the opportunity to meet with BP, Shell and Equinor in recent weeks—since the election—to hear about what they are seeking to do to overcome the challenges that face them and, indeed, all of us. Equinor, I think, is heavily involved in the likes of the high wind turbine off the coast of the UK, which is a fantastic initiative.

As an Aberdonian—I point out that I am an adopted Aberdonian, but an Aberdonian none the less, before my hon. Friend the Member for Aberdeen North (Kirsty Blackman) says anything—I will labour the point that just off the coast of our city is the Vattenfall development. That single development has the energy capacity to provide for 88,000 homes, the entire population of Aberdeen. It is brilliant not just because it is able to do that; it has the added bonus of annoying the President of the United States, whose golf course has apparently been impacted.

Aberdeen is of course an oil and gas city, but, as I just mentioned, the Vattenfall development is off the coast and we are also a leader in hydrogen technology, which has a role to play as we seek to move into a more sustainable future. I am very fortunate in living extremely close to one of the hydrogen developments in Aberdeen, and I know that if we seek to build on that industry, it can be successful. I hope that the Minister, as he sums up the debate, will refer to the hydrogen industry with regard to where the future of the UK lies in terms of an energy transition.

My final comment is about what the hon. Member for Henley (John Howell) said about skills and harnessing them. I congratulate him on the work that he has done, which I am sure has benefited my city and my constituents. We need to harness skills, not just for export but to allow the sustainable transition to take place in the oil and gas sector. If we are to have a sustainable future, we need the expertise of individuals who have managed to build the oil and gas sector to transfer over and to lead that renewable future. We cannot have a sustainable future without the oil and gas sector; the people behind it have to be at the forefront.

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[Stephen Flynn]

The hon. Member mentions stability. The Labour party stood on a manifesto commitment for a windfall tax. Is that something it still supports?

[Dr Whitehead]

The question of a windfall tax depends to a considerable extent on the health of the industry as a whole. Members have mentioned what revenues may arise for development purposes, and that is essentially what we are talking about. I emphasise that the ability to provide revenue very much depends on whether the industry reshapes itself in the way I have described, and that is why a sector deal is imperative.

As a veteran of these debates—I am sure the hon. Member for Aberdeen North will recall this—I remember Richard Harrington, the then Minister, saying in October 2018 that we were at

“the final stage of the process”.—[Official Report, 9 October 2018; Vol. 647, c. 22WH.]

He said that we would be at the end of the process soon. In the debate in March 2019 on sector deals, he said:

“I am very much looking forward to advancing these proposals.”—[Official Report, 14 March 2019; Vol. 656, c. 222WH.]

We received a knock-back shortly after that, when the Government said they did not think it was such a good idea to have a sector deal after the Select Committee had produced its report. Then, the Conservative manifesto stated that there would be a sector deal after all.

I look forward to hearing from the Minister whether there is a sector deal in the pipeline, so to speak, in the way we are talking about this morning. If there is, when will that sector deal come out of the end of the pipeline and secure the industry for the future, in the way that every Member in this Chamber would want? The Minister could greatly advance our discussion—I am sure he will—by putting those points on the table today.

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[Kwasi Kwarteng]

I give the hon. Lady an absolute assurance that I have been totally committed to CCUS. In fact, one of the first conversations I had when appointed was with a leading industry figure, who called me to say, “I hope you will deliver on CCUS.” I was very pleased to say, “I will absolutely champion this. It is central to our strategy.” We have legislated for a net zero carbon emissions target by 2050. How we reach that without CCUS is a mystery to me. CCUS should be at the centre of any strategy to hit net zero carbon emissions by 2050. The Government are absolutely committed to that.

I assure the hon. Lady that I am as committed, if not more so, than my predecessor to landing the technology, because it is crucial. The net zero carbon legislation was passed in June 2019, and within three weeks I was the Energy Minister, so it has really shaped my entire experience of the portfolio. For most of my predecessor’s tenure, we still had the 80% reduction target. It is now a much more serious and pressing concern, and I hope that we will be able to deliver on that commitment. In our next debate on oil and gas, I hope we will be able to say that we have CCUS investment and potential clusters.

On the point made by the hon. Member for Kilmarnock and Loudoun (Alan Brown), it seems to me that if we are going to commit large amounts of capital to CCUS, there will be more than one cluster. There is a debate about where those clusters and that deployment of capital will take place, but my understanding is that if we are going to commit that capital, it will not be in just one area.

It is not just about CCUS. The net zero strategy encompasses a wide range of technologies. We committed in the manifesto to 40 GW of offshore wind capacity, which is a huge step from our previous 30 GW commitment. It is a very ambitious commitment, and there will be challenges in meeting it, but I am convinced that the industry, in co-operation with Government, will be able to do so. We have also committed to £9.2 billion to improve the energy efficiency of homes. We are particularly concerned about fuel poverty.

[Stephen Flynn]

This is slightly off topic, but on improving the energy efficiency of homes, will the Minister support lobbying the Chancellor for a reduction in VAT on repairs and renovations to existing properties?

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[Peter Aldous]

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[Stephen Flynn]

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[Kirsty Blackman]

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[Peter Aldous]

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[Stephen Flynn]

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[Kwasi Kwarteng]

Time is short; I am afraid that I have to wrap up my remarks. I sincerely thank my hon. Friend the Member for West Aberdeenshire and Kincardine for raising this important issue for our economy. It was a full and comprehensive debate. I am sorry that we did not have time to deal with every point raised, but the debate was very constructive.